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Senate panel finalises recommendations on power subsidy

The Senate Standing Committee on Finance and Revenues has finalised crucial recommendations, including raising power sector subsidy up to Rs500 billion from the proposed allocation of Rs184 billion in the Budget 2012/13, sources said on Wednesday.

It also recommended increased tax rates on import of luxury vehicles, the sources said, adding that the committee unanimously recommended scaling down the rate from one percent to 0.25 percent that was assigned to be collected by manufacturers against the sales made to traders and distributors in the Finance Bill 2012, despite stiff resistance from the ministry of finance high-ups on increasing provision of the power sector subsidies, arguing that it would result in hike in the budget deficit manifold.

Senator Sughra Imam supported the ministry of finance, but other senators asked the government to move ahead as the provision of electricity would boost economic activities and the only need is to streamline the taxation system to maximise revenue generation, the sources said.

If the budget deficit has been estimated at Rs1 trillion, then why it cannot go up to Rs1.5 trillion for providing electricity to the people, said Senator Tahir Mashadhi.

The committee rejected a proposal of the Federal Board of Revenue (FBR) member to impose additional income tax on those consumers who are using more than 1,000 units per month of electricity in order to discourage increased usage.

Senator Illyas Bilour, a business tycoon belonging to Khyber-Pakhtunkhwa (KPK), vehemently opposed the FBR for moving ahead by assigning manufacturers with the responsibility of ensuring one percent tax collection on behalf of the revenue body, saying that Army during the Musharraf regime had failed on the documentation exercise and he was clueless that how the manufacturers could pursue retailers and distributors on this account, the sources said.

“I, hereby, declare that this step will promote informal economy and he himself will be forced to become part of 50 percent of informal sector,” said Senator Bilour.

The Federation of Pakistan Chambers of Commerce and Industries (FPCCI) and other chambers had already written a letter to the FBR and demanded its withdrawal that would only result in further price hike in the country, he said.

Abdul Wajid Rana, secretary finance, said that it was a wrong move to allow direct interference of Army in the documentation exercise. FBR’s Member Inland Revenue Service Shahid Hussain Asad said that they proposed this tax with intention to move towards the documentation of the economy.

A PPP Senator Usman Saifullah, who at the first stage opposed the FBR proposal by arguing that it would further burden the manufacturers. At a later stage, he withdrew his opposition, saying that if it could result in boosting the documentation, he would not oppose it.

Senator Bilour also took the decision to withdraw amendment under protest and some senators asked him not to withdraw his amendment.

On intervention from the chairperson of the committee, Nasreen Jalil of MQM and PPP’s Senator Sugra Imam, it was unanimously decided that the rate of this tax should be proposed to reduce from one percent to 0.25 percent, the sources said.

On the issue of jurisdiction of the capital gains tax (CGT) in the aftermath of 18th Amendment, the FBR submitted a written reply before the committee after taking into account the viewpoint given by the ministry of law.

The committee was told that the capital gains tax on immoveable property was the domain of the federal government in the aftermath of 18th Amendment, but the federal government could not legislate on the capital value of assets.

During the committee proceedings, the FBR’s Member Legal proposed consideration of two percent tax collection on the basis of sale value at point of registry of property.

But the committee members opposed this proposal on the pretext that it would be again considered effortless to plunge into matters of provincial subject as the capital value falls under jurisdiction of provincial governments. —Mehtab Haider